CAMBRIDGE, Mass., April 28, 2021 /PRNewswire/ -- Pegasystems Inc. (NASDAQ: PEGA), the software company that crushes business complexity, released its financial results for the first quarter of 2021.
"The pandemic clearly reaffirmed that organizations need to accelerate their digital transformation initiatives with low-code solutions. Our clients see this as improving time-to-market, time-to-value, and overall agility," said Alan Trefler, founder and CEO, Pegasystems. "We expect clients will remain on their accelerated path, and we are well positioned to support those efforts. We're excited to showcase many of our clients' most recent digital transformation successes next week at PegaWorld."
"We've reached a point in our cloud transition where subscription revenue growth aligns with total ACV growth," said Ken Stillwell, COO and CFO, Pegasystems. "Total revenue grew 18 percent year over year and subscription revenue grew by 23 percent. This is a strong indication that our business strategy is working, and our cloud transition is progressing as planned."
Financial and performance metrics(1)
(Dollars in thousands, except per share amounts) | Three Months EndedMarch 31, | |||||||||
2021 | 2020 | Change | ||||||||
Total revenue | $ | 313,499 | $ | 265,591 | 18 | % | ||||
Net (loss) - GAAP | $ | (6,617) | $ | (25,372) | 74 | % | ||||
Net income - Non-GAAP | $ | 22,113 | $ | 4,032 | 448 | % | ||||
Diluted (loss) per share - GAAP | $ | (0.08) | $ | (0.32) | 75 | % | ||||
Diluted earnings per share - Non-GAAP | $ | 0.26 | $ | 0.05 | 420 | % |
(1) A reconciliation of our Non-GAAP and GAAP measures is at the end of this release. |
(Dollars in thousands) | Three Months Ended March 31, | Change | |||||||||||||||
2021 | 2020 | ||||||||||||||||
Pega Cloud | $ | 67,858 | 22 | % | $ | 43,466 | 16 | % | $ | 24,392 | 56 | % | |||||
Maintenance | 75,561 | 23 | % | 73,695 | 28 | % | 1,866 | 3 | % | ||||||||
Term license | 111,509 | 36 | % | 90,257 | 34 | % | 21,252 | 24 | % | ||||||||
Subscription(2) | 254,928 | 81 | % | 207,418 | 78 | % | 47,510 | 23 | % | ||||||||
Perpetual license | 5,452 | 2 | % | 3,659 | 1 | % | 1,793 | 49 | % | ||||||||
Consulting | 53,119 | 17 | % | 54,514 | 21 | % | (1,395) | (3) | % | ||||||||
Total revenue | $ | 313,499 | 100 | % | $ | 265,591 | 100 | % | $ | 47,908 | 18 | % |
(2) Reflects client arrangements subject to renewal (Pega Cloud, maintenance, and term license). |
Note: See the schedules at the end of this release for additional information. |
Quarterly conference call
A conference call and audio-only webcast will be conducted at 5:00 p.m. EDT on April 28, 2021.
Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1-866-548-4713 (domestic), 1-323-794-2093 (international), or via webcast (http://public.viavid.com/index.php?id=144131) by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.
A replay of the call will also be available on www.pega.com by clicking the Earnings Calls link in the Investors section.
Discussion of Non-GAAP financial measures
We believe that non-GAAP financial measures help investors understand our core operating results and prospects, consistent with how management measures and forecasts the Company's performance without the effect of often one-time charges and other items outside our normal operations. The supplementary non-GAAP financial measures are not meant to be superior to, or a substitute for, results of operations prepared under U.S. GAAP.
A reconciliation of our Non-GAAP and GAAP measures is at the end of this release.
Forward-looking statements
Certain statements in this press release may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995.
Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, projects, forecasts, guidance, likely, and usually, or variations of such words and other similar expressions identify forward-looking statements, which are based on current expectations and assumptions.
Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:
These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020, and other filings we make with the U.S. Securities and Exchange Commission ("SEC"). Except as required by applicable law, we do not undertake and expressly disclaim any obligation to update or revise these forward-looking statements publicly, whether as the result of new information, future events, or otherwise.
The forward-looking statements in this press release represent our views as of April 28, 2021.
About Pegasystems
Pega delivers innovative software that crushes business complexity. From maximizing customer lifetime value to streamlining service to boosting efficiency, we help the world's leading brands solve problems fast and transform for tomorrow. Pega clients make better decisions and get work done with real-time AI and intelligent automation. And, since 1983, we've built our scalable architecture and low-code platform to stay ahead of rapid change. Our solutions save people time, so our clients' employees and customers can get back to what matters most. For more information on Pegasystems (NASDAQ: PEGA) visit www.pega.com.
Press contact:Lisa PintchmanPegasystems Inc.lisa.pintchman@pega.com(617) 866-6022 Twitter: @pega
Investor contact:Garo ToomajanianICR for Pegasystems Inc.pegainvestorrelations@pega.com(617) 866-6077
All trademarks are the property of their respective owners.
PEGASYSTEMS INC. | |||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(in thousands, except per share amounts) | |||||||
Three Months Ended March 31, | |||||||
2021 | 2020 | ||||||
Revenue | |||||||
Software license | $ | 116,961 | $ | 93,916 | |||
Maintenance | 75,561 | 73,695 | |||||
Pega Cloud | 67,858 | 43,466 | |||||
Consulting | 53,119 | 54,514 | |||||
Total revenue | 313,499 | 265,591 | |||||
Cost of revenue | |||||||
Software license | 650 | 684 | |||||
Maintenance | 5,786 | 5,576 | |||||
Pega Cloud | 22,557 | 17,533 | |||||
Consulting | 53,454 | 55,735 | |||||
Total cost of revenue | 82,447 | 79,528 | |||||
Gross profit | 231,052 | 186,063 | |||||
Operating expenses | |||||||
Selling and marketing | 148,739 | 136,024 | |||||
Research and development | 62,442 | 58,727 | |||||
General and administrative | 18,270 | 15,630 | |||||
Total operating expenses | 229,451 | 210,381 | |||||
Income (loss) from operations | 1,601 | (24,318) | |||||
Foreign currency transaction (loss) | (5,098) | (5,947) | |||||
Interest income | 153 | 607 | |||||
Interest expense | (1,880) | (2,306) | |||||
(Loss) on capped call transactions | (19,117) | (18,592) | |||||
Other income, net | 106 | 1,374 | |||||
(Loss) before (benefit from) income taxes | (24,235) | (49,182) | |||||
(Benefit from) income taxes | (17,618) | (23,810) | |||||
Net (loss) | $ | (6,617) | $ | (25,372) | |||
(Loss) per share | |||||||
Basic | $ | (0.08) | $ | (0.32) | |||
Diluted | $ | (0.08) | $ | (0.32) | |||
Weighted-average number of common shares outstanding | |||||||
Basic | 81,004 | 79,808 | |||||
Diluted | 81,004 | 79,808 |
PEGASYSTEMS INC. | ||||||||||
UNAUDITED RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1) | ||||||||||
(in thousands, except percentages and per share amounts) | ||||||||||
Three Months Ended March 31, | ||||||||||
2021 | 2020 | Change | ||||||||
Net (loss) - GAAP | $ | (6,617) | $ | (25,372) | 74 | % | ||||
Stock-based compensation(2) | 30,100 | 23,175 | ||||||||
Capped call transactions | 19,117 | 18,592 | ||||||||
Convertible senior notes | 673 | 1,719 | ||||||||
Headquarters lease | (3,417) | — | ||||||||
Amortization of intangible assets | 1,002 | 1,018 | ||||||||
Foreign currency transaction loss | 5,098 | 5,947 | ||||||||
Other | 12 | 3,899 | ||||||||
Income tax effects(3) | (23,855) | (24,946) | ||||||||
Net income - Non-GAAP | $ | 22,113 | $ | 4,032 | 448 | % | ||||
Diluted (loss) per share - GAAP | $ | (0.08) | $ | (0.32) | 75 | % | ||||
Non-GAAP adjustments | 0.34 | 0.37 | ||||||||
Diluted earnings per share - Non-GAAP | $ | 0.26 | $ | 0.05 | 420 | % | ||||
Diluted weighted-average number of common shares outstanding - GAAP | 81,004 | 79,808 | 1 | % | ||||||
Non-GAAP Adjustments | 5,129 | 4,337 | ||||||||
Diluted weighted-average number of common shares outstanding - Non-GAAP | 86,133 | 84,145 | 2 | % |
(1) | We believe that non-GAAP financial measures help investors understand our core operating results and prospects, consistent with how management measures and forecasts the Company's performance without the effect of often one-time charges and other items outside our normal operations. The supplementary non-GAAP financial measures are not meant to be superior to, or a substitute for, results of operations prepared under U.S. GAAP. |
Our Non-GAAP financial measures reflect the following adjustments:
(2) Stock-based compensation: | |||||||
Three Months EndedMarch 31, | |||||||
(in thousands) | 2021 | 2020 | |||||
Cost of revenue | $ | 5,925 | $ | 5,152 | |||
Selling and marketing | 13,720 | 9,718 | |||||
Research and development | 6,770 | 5,496 | |||||
General and administrative | 3,685 | 2,809 | |||||
$ | 30,100 | $ | 23,175 | ||||
Income tax benefit | $ | (5,991) | $ | (4,582) | |||
(3) Effective income tax rates: | |||||||
Three Months EndedMarch 31, | |||||||
2021 | 2020 | ||||||
GAAP | 73 | % | 48 | % | |||
Non-GAAP | 22 | % | 22 | % |
Our GAAP effective income tax rate is subject to significant fluctuations due to various factors, including excess tax benefits generated by our stock-based compensation plans, gains and losses on our capped call transactions, tax credits for stock-based compensation awards to research and development employees, and unfavorable foreign stock-based compensation adjustments. We determine our Non-GAAP income tax rate by using applicable rates in taxing jurisdictions and assessing certain factors, including our historical and forecasted earnings by jurisdiction, discrete items, and our ability to realize tax assets. We believe it is beneficial for our management to review our Non-GAAP results consistent with the effective income tax rate in our annual plan as established at the beginning of each year, given this tax rate volatility.
PEGASYSTEMS INC. | |||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(in thousands) | |||||||
March 31, 2021 | December 31, 2020 | ||||||
Assets | |||||||
Cash, cash equivalents, and marketable securities | $ | 442,358 | $ | 465,168 | |||
Accounts receivable | 159,324 | 215,827 | |||||
Unbilled receivables | 228,603 | 207,155 | |||||
Other current assets | 91,868 | 88,760 | |||||
Total current assets | 922,153 | 976,910 | |||||
Unbilled receivables | 108,048 | 113,278 | |||||
Goodwill | 82,037 | 79,231 | |||||
Other long-term assets | 416,265 | 434,843 | |||||
Total assets | $ | 1,528,503 | $ | 1,604,262 | |||
Liabilities and stockholders' equity | |||||||
Accounts payable | $ | 24,426 | $ | 24,028 | |||
Accrued expenses, including compensation and related expenses | 119,255 | 182,273 | |||||
Deferred revenue | 244,170 | 232,865 | |||||
Other current liabilities | 16,599 | 20,969 | |||||
Total current liabilities | 404,450 | 460,135 | |||||
Convertible senior notes, net | 588,418 | 518,203 | |||||
Operating lease liabilities | 36,471 | 59,053 | |||||
Other long-term liabilities | 20,239 | 24,699 | |||||
Total liabilities | 1,049,578 | 1,062,090 | |||||
Stockholders' equity | 478,925 | 542,172 | |||||
Total liabilities and stockholders' equity | $ | 1,528,503 | $ | 1,604,262 |
PEGASYSTEMS INC. | |||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(in thousands) | |||||||
Three Months EndedMarch 31, | |||||||
2021 | 2020 | ||||||
Net (loss) | $ | (6,617) | $ | (25,372) | |||
Adjustments to reconcile net (loss) to cash provided by (used in) operating activities | |||||||
Non-cash items | 58,885 | 56,096 | |||||
Change in operating assets and liabilities, net | (30,618) | (49,047) | |||||
Cash provided by (used in) operating activities | 21,650 | (18,323) | |||||
Cash provided by (used in) investing activities | 15,489 | (12,562) | |||||
Cash (used in) provided by financing activities | (34,794) | 502,174 | |||||
Effect of exchange rate changes on cash and cash equivalents | (1,536) | (1,510) | |||||
Net increase in cash and cash equivalents | 809 | 469,779 | |||||
Cash and cash equivalents, beginning of period | 171,899 | 68,363 | |||||
Cash and cash equivalents, end of period | $ | 172,708 | $ | 538,142 |
PEGASYSTEMS INC.ANNUAL CONTRACT VALUE ("ACV")(in thousands, except percentages)
Annual contract value ("ACV") (1) - ACV, as reported, represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV for term license and Pega Cloud contracts. Maintenance revenue for the quarter then ended is multiplied by four to calculate ACV for maintenance. Client Cloud ACV is composed of maintenance ACV and term license ACV. ACV is a performance measure that we believe provides useful information to our management and investors, particularly during our Cloud Transition. Reported amounts have not been adjusted for changes in foreign exchange rates.
March 31, 2021 | March 31, 2020 | Change | |||||||||||
Maintenance | $ | 302,244 | $ | 294,780 | $ | 7,464 | 3 | % | |||||
Term | 267,931 | 234,361 | 33,570 | 14 | % | ||||||||
Client Cloud | 570,175 | 529,141 | 41,034 | 8 | % | ||||||||
Pega Cloud | 282,389 | 182,165 | 100,224 | 55 | % | ||||||||
Total | $ | 852,564 | $ | 711,306 | $ | 141,258 | 20 | % |
(1) Foreign currency exchange rate changes contributed 3% to total ACV growth in 2021. |
PEGASYSTEMS INC. | |||||||||||||||||||||||||
BACKLOG | |||||||||||||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||||||||
Remaining performance obligations ("Backlog") - Backlog represents expected future revenue on existing non-cancellable contracts. | |||||||||||||||||||||||||
March 31, 2021 | |||||||||||||||||||||||||
Perpetual license | Term license | Maintenance | Pega Cloud | Consulting | Total | ||||||||||||||||||||
1 year or less | $ | 9,649 | $ | 41,025 | $ | 220,100 | $ | 252,104 | $ | 21,068 | $ | 543,946 | 55 | % | |||||||||||
1-2 years | 629 | 9,874 | 52,366 | 187,456 | 914 | 251,239 | 26 | % | |||||||||||||||||
2-3 years | — | 7,055 | 33,337 | 91,861 | 1,756 | 134,009 | 14 | % | |||||||||||||||||
Greater than 3 years | — | 377 | 16,834 | 32,895 | 510 | 50,616 | 5 | % | |||||||||||||||||
$ | 10,278 | $ | 58,331 | $ | 322,637 | $ | 564,316 | $ | 24,248 | $ | 979,810 | 100 | % | ||||||||||||
Change in Backlog Since March 31, 2020 | |||||||||||||||||||||||||
$ | 4,115 | $ | 15,142 | $ | 52,914 | $ | 149,842 | $ | 3,971 | $ | 225,984 | ||||||||||||||
67 | % | 35 | % | 20 | % | 36 | % | 20 | % | 30 | % | ||||||||||||||
March 31, 2020 | |||||||||||||||||||||||||
Perpetual license | Term license | Maintenance | Pega Cloud | Consulting | Total | ||||||||||||||||||||
1 year or less | $ | 3,995 | $ | 30,962 | $ | 205,083 | $ | 174,277 | $ | 18,945 | $ | 433,262 | 58 | % | |||||||||||
1-2 years | 2,168 | 5,088 | 34,633 | 125,473 | 1,215 | 168,577 | 22 | % | |||||||||||||||||
2-3 years | — | 6,504 | 19,411 | 81,187 | 107 | 107,209 | 14 | % | |||||||||||||||||
Greater than 3 years | — | 635 | 10,596 | 33,537 | 10 | 44,778 | 6 | % | |||||||||||||||||
$ | 6,163 | $ | 43,189 | $ | 269,723 | $ | 414,474 | $ | 20,277 | $ | 753,826 | 100 | % |
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SOURCE Pegasystems Inc.